However, healthy banks mostly felt the benefits. There were 13 local banks with a noncurrent loan ratio over 10 percent, including eight over 15 percent. That’s up from 11 and six, respectively, in the previous quarter.

Repossessed property decreases

Local banks held $707 million in repossessed property, down $31 million from the prior quarter. Nearly half of that was construction and land.

Loans past due by 30 to 89 days crept up moderately, to $441 million.

A significant amount of problem loans at local banks are protected by loss-sharing deals with the FDIC because they came from failed banks. When those are taken out of the equation, local banks maintained 46 cents for future loan losses to cover every dollar of noncurrent loans on Sept. 30. While that’s up from 41 cents on June 30, it’s still well below the national rate of 57 cents.

Reserves levels at local banks vary widely. Of the 61 local banks without FDIC loss-sharing protection, 12 had reserve coverage below 25 percent, up from eight in the second quarter.

Thomas said banks can’t justify reducing reserves in this uncertain environment with the fiscal cliff looming.

Local banks charged off 0.55 percent of their loans this year due to credit problems. Yet, 26 local banks charged off more than 1 percent of their total loans.

Overall, charge-offs were down moderately in the third quarter when compared to the second.

Since real estate values have improved, fewer borrowers will default because they’re underwater, and the charge-offs that occur shouldn’t be very severe, said Terry Baxter, a director in the bank accounting practice of McGladrey LLP in Fort Lauderdale. He expects charge-offs to continue declining, unless there’s another economic downturn.

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